*2 man, weight and Ill., Chicago, other of standard petitioner. *3 pro- quality and many from manufacturers Counsel, Kelley, William T. Chief country in resell- throughout ducers the' and Counsel, Cassedy, W. Asst. Gen. James wholesaler, them, principally ing Corkey, Sp. Atty., E. Federal Trade James automatic, coin-operated vend- lessees itsof Commission, C., Washington, re- D. engaged ing been machines. It had also spondent. machines, development in the called of such Butler, Ill., Thomas Chicago, C. H. John although manufacture canteens, it not did Austern, Temko, Stanley L. William A. system them. Its to lease the machines was Quinlan, C., Washington, R. D. Thomas became its sole cus- “distributors” who Wilkins, Mulroy, (Richard Chicago, F. Ill. products in tomers confectionery for the C., Sutter, Halls, Washington, Hopkins, D. gen- which machines The were dealt. Owen, Ill., Chicago, DeWolfe & of coun offices, factories, erally other located in and sel), for amici curiae. January commercial establishments. As of KERNER, Before DUFFY, and LIND- 230,150 it owned machines were LEY, Judges. Circuit leased to 83 distributors located in

separate territories in 33 states and ^KERNER, District Columbia. Under terms of Judge. Circuit contracts the distributors bound lease engaged is in the two-fold any themselves machines vending not use business of and developing leasing auto- petitioner other than during those matic vending pur- machines and in the years term of the contract and for five after candy, chase of gum, nuts and other con- termination, any not sell in the machines fectionery products for resale to its dis- products purchased other than those from tributors who in turn distribute them to the petitioner, any products sell such and not to public by means of the vending machines. except in the machines. It seeks review of an'order of the Federal Trade Commission directing it to cease 'The Commission found that the effect of and desist from discriminatory certain petitioner’s .exclusive-dealing had contracts practices aspects related to 'both of its busi- substantially competition been to lessen or ness. The Federal Commission, by monopoly tend to create a in both lines of petition, cross seeks and affirmance en- engaged, namely, commerce in which was of the forcement order. purchase packaged and sale mer- chandise suitable for in distribution auto- complaint was in two counts. Count machines, vending dealing matic and the charged I Clayton violation of 3 of § competition in the machines. Thus Act, 14, by 15 U.S.C.A. the use of § substantially lessened between exclusive-dealing leasing contracts in the suppliers competitors and their who were vending machines. charged Count II petitioner, unable sell peti- between Clayton violation of of the Act as § competitors, tioner and its and between its Act, amended the Robinson-Patman this, competitors, distributors and their and 13(f), by knowingly U.S.C.A. inducing turn, in tended to in monopoly create a knowingly receiving price discrimina- petitioner, distributors, its and certain purchases tions in connection with its processors. manufacturers and The 'con- products gum, confectionery nuts tracts had a similar effect as between only the course commerce. Petitioner’s petitioner vending machine manufac- general any denial answer was vio- turers. charged lation of Act as either count. petitioner At the close of Commission’s The Commission found that case complaint and, upon moved to dismiss had induced and knowingly re- motion, prices denial its it offered no evidence ceived from suppliers lower its than response. prices paid competitors for re- by- any is with other prices paid competing products; similar respondent spondent’s business, where lower from were 33% 1.2% other customers competitors; competing paid by than those seller; however, fore- provided, that the from about it received differentials preclude the going construed to made shall suppliers. Petitioner its 115 alleged respondent any vio- defending as to attempt justification cost show that a lower showing lation of this order The Commis- of these differentials. accepted from price received had at- net sion further found that dif- allowance for and seller makes position sale due a dominant tained manufacture, sale or the cost of it dealt ferences in distribution *4 differing vending resulting from the delivery of through by and means the com- which such quantities machines in machines, through the methods with sales $14,- sold or delivered by are such seller $1,937,117 1936 to modities in expanding from respondent.” 253,547 1944, expansion the Com- to which in its exclusive- largely mission attributed to as the order challenges Petitioner of low- enjoyment dealing -andits contracts it is de- grounds: the That Count I on purchase goods. prices in of er the its join petitioner’s for failure fective destroying valu- peti- parties, as thus lessees concluded The Commission absence; rights in their charged able contractual the violation guilty tioner was of use peti- that the lessees and that the condition accordingly entered its order and the petitioner’s in can- merchandise and desist: tioner cease one, teens a lawful into, or con- entering enforcing 1. -From exclusive-dealing operation the in tinuing offending analyzes the however, described, “Provided, contracts nominal (1) providing as for contracts preceding in the nothing contained rental, territory distribu for (2) exclusive * * * shall be construed paragraphs petitioner’s can tors, exclusive use of (3) entering in- respondent from prohibiting mer teens, purchases of (4) and exclusive * * * any with lessee any contract in the for use chandise * ** payment to provides which for canteens, destruction of and contends compensation as respondent of such the mutuality the destroys of (3) the (4) and its automatic the use of may for desire contracts, destroying the contracts thereby * * * protec- machines, Tor vending valuable stripping lessees of thus the and products salability of quality tion of and affecting rights injuriously and contract machines, or vending through its said sold peti point On this them in their absence. respondent’s protection of provides for court, of this two decisions tioner relies on distribution, of its and territories franchise Inc., Express, v. Federal Fruit Growers’ name, its rental and trade of good and will Commission, Cir., 205 7 274 F. Trade income, development and the of additional 627, 42 S.Ct. granted, 257 U.S. (certiorari distributors’ business in its retention of stipula by 56, 405, and dismissed 66 L.Ed. public, when none territory, and the General, 261 tion on motion of the Solicitor with the conflict in provisions are 518, 629, 835) L.Ed. and 43 67 S.Ct. herein.” prohibitions forth set Refining Co. v. Federal Sinclair affirmed, Commission, Cir., 686, purchase of 276 F. 2. In connection nuts, gum 261 U.S. S.Ct. L.Ed. .products, confectionery appear do to furnish au cases While the Knowingly inducing “From * * * on this petitioner’s in contention thority for discrimination receiving impelled to follow directly not feel by point, we do products, price of such * * * in the factors the difference in view of receiving them inducing indirectly [or] impressed appear have this court known re- price from a net the orders there involved. annulling representatives to be below or its spondent Moreover, petitioner’s analysis we note like which said at net important pro reference other omits being by such quality are sold grade of the contract which favor the customers, visions the seller where other seller to but do not sell to lessee turers lessor, namely, who guarantee out also shut might to its lessees are com- sell monthly sales volume average of an petitioner. This competition with average volume of the parable sales the national interference the constitutes substantial month, right very for the same Moreover, are 'con- competition. upon de- with contract to terminate the lessor does therein, portion of the order vinced that this any condition lessee in fault peti- that, upon interference with termination not constitute an and a covenant rights the fact that view of engage tioner’s lease, the shall lessee provisos safeguard ample for' furnish any merchandise the distribution of right protection goodwill vending machines territory by means of compensation. the rule period years. Under five Corp. Machinery United v. United Shoe peti- by counselthat the We are informed States, 451, 456, 42 258 U.S. S.Ct. portion tion to review the Count II not indis- lessees were aof presents first court test order parties pensable necessary or even the Act buyer’s liability under enjoined proceedings. covenants “The pro- although there have been numerous lessor, were inserted the benefit *5 ceedings Commission. thereunder before the that character and were of restrictive such question the principal raised relates to injuriously right the could be no of lessee proof. that of Petitioner burden contends by injunction.” the affected Petitioner permits Act which the Robinson-Patman distinguish case on basis seeks to this the price cost based on differentials differences mutuality of any total of of the absence buyer prove require to seller’s does a his not no in this consideration. find merit We to justification, and if it be construed cost that attempted And we note distinction. heavy imposes so, such so do construction two de- case was after this decided the a buyer a as to to burden on the amount court, cisions of this hence not available deprivation process well as of due as question parties. to it on the of the Act. eliminating justification cost proper understanding issues a the For of legality respect With to the asserted necessary (a), (b), read subsections it is to condition, petitioner again the refers 2 (f) together. of § 463, affirmed, the Sinclair case as 261 U.S. any 2(a) it unlawful for Section makes 450, However, 43 67 S.Ct. L.Ed. 746. commerce, person course engaged in think the elements distinction between the commerce, price in to discriminate of such controlling by contract considered the purchasers commodi- between different Supreme there, 463, the Court see 261 U.S. quality grade and the ties of like where 474, 453, at page 450, 43 page S.Ct. at may such be sub- effect of discrimination (in those of the here contract involved competition, provided stantially to lessen by cluding those make petitioner) omitted prevent therein shall nothing contained that authority upholding it better order for the which make due allowance differentials setting than See also Standard aside. manufacture, in cost of sale for differences States, Oil Co. of California v. United 337 differing delivery resulting from meth- or 1371; 293, 1051, 69 U.S. S.Ct. 93 L.Ed. delivery. quantities in or sale ods States, International Salt Co. v. United 392, 2(b) provides upon proof that And S.Ct. 20. Section certainly question rebutting burden can this a the be on discrimination there prima showing that by record but actual effect of the case thus made the the facie upon competitors justification person “shall conditions was to foreclose the section, charged from a with violation of substantial share the market as a this justification affirmatively to both lines of As unless shall be business. out, shown, pointed respect the Commission the Commission is with authorized products distributed, terminating job the order the competitive an discrimina- issue Provided, however, That bers and wholesalers cannot con- nothing sell to these tion : * * * operate 200,000 peti lessees who over of this tained in sections machines, vending prevent rebutting tioner’s manufac- a seller the title shall prima showing buyer a knowingly case thus made facie receive under Sec- * * * * * pur- price Austin, that his tion lower *.” Dis- Price * * * good chaser faith in crimination and was made Related Problems Under Act, com- the price meet low a equally an Robinson-Patman American Law * * petitor Institute (1950) pp. This the fur- un- construction of section is 2(f) provides Section it shall be ther out person language borne of sub- lawful in com- “engaged section merce, commerce, (b) imposing the burden re- in the course of such prima butting by showing facie case to induce or receive a discrim- justification, seller, upon upon price prohibited by this ination but person charged section.” violation of section, although further provides language We find no basis in may by showing seller rebut three subsections for a distinction price lower good was made in faith to scope buyers their as between and sellers. meet competitive a price. low It has now been established cannot say that this apparently careful Act, proceeding under the Com once language choice of meaningless, has fact of a mission established the would be theory. under Hence we products in differential in sale of like agree cannot in order to sustain competition to lessen tending commerce charges under 2(f) the Commission was upon monopoly, create burden rests required prove the absence of cost justify justification. provided the means discrimination words, *6 (a) (b). or subsection In other Petitioner further § contends that 2(a) prohibits such the discriminations unless a construction of the section con they and, justified, be as the Court process can stitutes a denial by of due imposing impossible pointed out in Federal Trade Commission an proof burden of upon it. Co., 37, 44, However, 334 68 v. Morton Salt U.S. we that think defense is not 1196, petitioner general “the S.Ct. L.Ed. available 92 to on the record in this that bur statutory rule of construction the case. Its charge answer to the was a exemption justification general and, of or proving den denial at the of close the Com special exception prohibitions case, a to the mission’s under a motion to It dismiss. who generally a rests on one thus laid of statute no foundation for its be assertion benefits, requires respond that fore claims its this court justification that cost proviso impossible proof the proof by ent undertake under of buyer this a and that a concedes, must, 2(a).” Petitioner of as it construction of 2(f) requiring buyer a § § a proceeding against a seller un that “in to sustain the of proof burden such would of a 2(a), process. der seller has the burden be violation of the due It not is § proof enough the just proof show he comes within to that assert that not is available, it proviso.” 2(f) equally impossible. un is But makes or Tennessee § Con buyer a induce or for solidated lawful Coal Co. v. Commissioner of In prohibited Revenue, Cir., by any discrimination ternal 6 117 F.2d receive 452. As section, escape from and we Court Mfg. see the said Anniston v. Co. Davis, places 352, 353, 816, that this precisely the conclusion 57 S.Ct. justification proving “Impossibility of cost proof same burden of * ** buyer, upon once Commission es may not be assumed. Whether receipt inducement or of knowing impossibility tablishes not any or of determina- such price illegal. question otherwise will exist is a which properly discrimination tion a respects all sections are in await ascertainment “The two should of (cid:127) * * * petitioner And in facts.” when chose parallel. discrimination not to a it unlawful for seller to introduce evidence as to it price which is the facts may 2(a) say Section is the dis not now that the grant under same defense allowed impossible proof- it is unlawful for the Act is useless crimination Motion for Rehearing On difficult Petition for it is more It is no true that doubt to Adduce his cost Leave Additional buyer seller’s for a to establish Evidence. justification than is for affirming entry our that After the decision say cannot he we bought. whom But expect the order arbitrary of the Federal Commission it is unreasonable granting petition enforce, he is cross buyer that or knows a who induces petition rehearing filed and" substantially lower than for receiving prices a motion for leave to adduce additional evi- good faith competitors to make some his Clayton Act, dence under prices of the IS § that such lower effort to ascertain U.S.C.Á. 21.§ sales to justified by lower costs are Com- that him. can assume Nor Section authorizes the court to order arbitrary so or unreason- be mission will such additional evidence to taken before required proof quantum as able the Commission if the movant show “shall under 'buyer proceeding in a the satisfaction of the court process. deprive of due as to him additional material and that evidence is there grounds were reasonable fail- two also contends ure to adduce proceed- such evidence in the sup are findings the Commission ing before Commission”. That it (1) evidence: ported substantial add now seeks to The evidence prices suppliers prospective informed is intended show that if the to the record acceptable to it would be terms which requires buyer to Act Robinson-Patman costs; (2) without consideration justification, the stat- prove cost its seller’s paid many prices knew imposes heavy a burden on it so as ute competitors higher than those it were deprivation process due be- amount to far sought did receive in so to induce and not, proof or is im- available cause such is prices knowledge net that meant possible. have actually by competitors. We ex paid petitioner as- motion grounds As sup find that the record and amined material (1) the evidence serts findings. ports both lack that the court held that this defense *7 peti- remains, process not available to question of due further One failed come forward because it tioner by petitioner for the time in raised first thereto; pertaining (2) and with evidence brief, reply whether Commission its grounds there were reasonable for fail- order on is entitled an enforcement proceeded to adduce it because it on the ure petition petition petitioner’s to re cross theory connec- was no rational there view, showing that vio in the absence of a proven receipt fact tion between order has occurred is lation presumption and the differentials Appeals for the Court imminent. and were unlawful (a) such differentials ques recently decided this Circuit Second (b) knew this fact. adversely to the Commission. Ru tion Commission, v. Federal beroid Co. no merit We find Cir., regret F.2d 294. We case It before the Com motion. tried and agree reasoning with the con cannot theory that mission on the the Commission denying eminent court of that clusion proving absence had burden of of cost We in accord are enforcement. justification, it contended that the and Com Clark, Judge dissenting, and conclusion burden, to sustain that mission failed hence him, the court stated the reasons case, prove and for that that it failed jurisdiction appeals does have simply refrained from in reason duty enforcement on cross order any evidence defense. What troducing deem it Commission. We petition is, in asking effect, to have the nowis amplify those to restate unnecessary reopened proceeding en order to entire reasons. hearing a a new the able have new on an ory after has had adverse affirmed; granted. of defense enforcement Order theory originally decision as to the relied upon in hearing full and fair before the Commission, issues raised of all review hearing.

on the record in that We as made

think 11 was not intended for purpose. “mere was not omission This step escaped

'of some which has the atten Kelly parties” tion of both referred to in States,

v. United 57 S.Ct. petitioner. cited

There considerable difference between record,

the failure to authenticate the sit case,

uation in that failure to offer evidence, upon theory relying of de subsequently

fense held to be mer without grounds

it. We find no such “reasonable failure to adduce such evidence in proceeding before the Commission” justify granting

would the motion. respect petition to the for rehear-

With

ing, presents questions we find that it fully

which were not considered us in petition original our review of the cross

petition.

Petition for rehearing and motion to ad-/ additional denied.

duce evidence / v. UNITED

KRAUSSE STATES. UNITED STATES. PAPP v. 121-136, Docket 22190-22200.

Nos. *8 Appeals

United States Court of Second Circuit.

Argued 8, 1952. Jan. Feb.

Decided